Fmr New York Fed President Dudley: Fed should stop enabling Trump

Author: Adam Button | Category: Central Banks

Every rate cut is a green light to escalate the trade war

Recently retired New York Fed President Bill Dudley argues in a column today that the Fed should refuse to play along with Trump's trade war.

What if the Fed's accommodation encourages the president to escalate the trade war further, increasing the risk of a recession? The central bank's efforts to cushion the blow might not be merely ineffectual. They might actually make things worse.
He suggests that Fed officials should state explicitly that the central bank won't bail out an administration that makes bad choices on policy.

Trump's ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks - including the risk of losing the next election.
It's some very strong stuff from Powell and you have to assume there are at least a few current FOMC members who feel the same way.
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